Everipedia Logo
Everipedia is now IQ.wiki - Join the IQ Brainlist and our Discord for early access to editing on the new platform and to participate in the beta testing.


An investor is a person that allocates capital with the expectation of a future financial return.[1] Types of investments include: equity, debt securities, real estate, currency, commodity, token, derivatives such as put and call options, futures, forwards, etc. This definition makes no distinction between the investors in the primary and secondary markets. That is, someone who provides a business with capital and someone who buys a stock are both investors. An investor who owns a stock is a shareholder.

Essential quality

The assumption of risk in anticipation of gain but recognizing a higher than average possibility of loss. The term "speculation" implies that a business or investment risk can be analyzed and measured, and its distinction from the term "investment" is one of degree of risk. It differs from gambling, which is based on random outcomes.[2]

Investors can include stock traders but with this distinguishing characteristic: investors are owners of a company which entails responsibilities.[3]

Types of investors

There are two types of investors, retail investors and institutional investors:

Retail investor

  • Individuals gambling in games of chance.

  • Individual investors (including trusts on behalf of individuals, and umbrella companies formed by two or more to pool investment funds)

  • Collectors of art, antiques, and other things of value

  • Angel investors (individuals and groups)

  • Sweat equity investor

Institutional investor

  • Venture capital and private equity funds, which serve as investment collectives on behalf of individuals, companies, pension plans, insurance reserves, or other funds.

  • Businesses that make investments, either directly or via a captive fund

  • Investment trusts, including real estate investment trusts

  • Mutual funds, hedge funds, and other funds, ownership of which may or may not be publicly traded (these funds typically pool money raised from their owner-subscribers to invest in securities)

  • Sovereign wealth funds

Investors might also be classified according to their styles. In this respect, an important distinctive investor psychology trait is risk attitude.

Investor protection

The term "investor protection" defines the entity of efforts and activities to observe, safeguard and enforce the rights and claims of a person in his role as an investor. This includes advice and legal action. The assumption of a need of protection is based on the experience that financial investors are usually structurally inferior to providers of financial services and products due to lack of professional knowledge, information or experience. Countries with stronger investor protections tend to grow faster than those with poor investor protections. Investor protection includes accurate financial reporting by public companies so the investors can make an informed decision. Investor protection also includes fairness of the market which means all participants in the market have access to the same information.

Through government

Investor protection through government involve regulations and enforcement by government agencies to ensure that market is fair and fraudulent activities are eliminated. An example of a government agency that provides protection to investors is the U.S. Securities and Exchange Commission (SEC), which works to protect reasonable investors in America.[1]

As individuals

Investor protection through individual is the strategy that one utilizes to minimize loss. Individual investors can protect themselves by purchasing only shares of businesses that they understand, or only those that remain calm through market volatility.

An individual investor may be protected by the strategy he uses in investment. The strategy includes an appropriate price of the stocks or assets in the right time he enters. It's hard to fix what "an appropriate price" is, and when it is appropriate because no one makes a purchase or a sale absolutely in his most favorable situation. However, determination may be made when the price of such share or assets are "undervalued" comparing to its potentiality. This is called the margin of safety where an investor can feel at ease when the price of the stocks is alarmingly down.

Investment tax structures

While a tax structure may change, it is generally accepted that long-term capital gains will maintain their position of providing an advantage to investors. This is countered by the opinion that after-tax returns should be considered, especially during retirement, on the basis that allocation to equities is in general, lower, than any returns and should be maximized, to the most lucrative extent. In the current circumstances, long-term capital gains offer one of the best opportunities in the United States tax structure.

It is made easier for investors to generate long-term capital gains by the employment of exchange-traded funds (ETFs), the process of investment in broad-based index funds, without required indicators. Although some outlandish ETFs could provide investors with the opportunity to venture into previously inaccessible markets and employ different strategies, the unpredictable nature of these holdings frequently result in short-term transactions, surprising tax equations and general performance results issues.

Company dividends are paid from after-tax profits, with the tax already deducted. Therefore, shareholders are given some respite with a preferential tax rate of 15% on "qualified dividends" in the event of the company being domiciled in the United States. Alternatively, in another country having a double-taxation treaty with the USA, accepted by the IRS;. Non-qualified dividends paid by other foreign companies or entities; for example, those receiving income derived from interest on bonds held by a mutual fund, are taxed at the regular and generally higher rate of income tax. When applied to 2013, this is on a sliding scale up to 39.6%, with an additional 3.8% surtax for high-income taxpayers ($200,000 for singles, $250,000 for married couples).[4]


A disciplined and structured investment plan prevents emotional investing which can be related to impulsive buying. This factor can be utilized to counteract the sentiments of a marketplace, which is often reflective of the emotional state of an entire population. Short-term activity in stock prices or the broader markets can frequently be compared to impulsive actions. This is seen in the term "bull run" which can induce investors to leap into an investment, as opposed to a "bearish market" that could influence a "sell-off". It is these types of market scenarios that can cause investors to abandon their investment strategies. Investor discipline is the ability to maintain an investment strategy even in the most tempting, or extreme conditions in the marketplace.

An established and popular method for stock market investors is Systematic Investment Plans (SIPs) especially for those who have a regular, monthly surplus income. The provision for reaping maximum benefits from these plans is that a disciplined strategy is maintained, one of the foremost advantages for a successful investor. Consistency is closely associated with an investment strategy and can be related to various, adopted, proven techniques; for example, predicting outperforming funds, valuation, or a technical strategy. A strategic advantage that meets the required consistency is long-term investment, which in turn, offers investors long-term capital gains tax advantages. While many investors try to exercise a long-term disciplined approach, the investment marketplace can provide various, tempting options; for instance, a sudden drop in the marketplace, or a pending worldwide event. This is particularly prevalent for retired investors, who are preserving their capital with care.

Constant advantage for retirees

In general, core indexes remain constant making it unnecessary for investors to move from one to another. Although an investor could transfer holdings; despite a maturation of the companies and their markets; a large-cap exchange-traded fund would never require being switched for a similar holding. A large-cap ETF will always remain so and an investor will usually want to retain at least a part allocation to large-cap equities in their portfolio.

It is consistency that is a significant advantage for ETF investors and one that makes it convenient to retain investment positions and benefit from long-term capital gains tax. Despite a potential reduction in the capital gains tax advantage, it is an advantage that should continue to provide some positive benefits in producing after-tax returns. This is a factor that could become an important issue in the future as taxes increase, affecting the lifestyles of retirees. It can be added to by additional taxes generated in short-term trading, exacerbating the situation, due to normal income-tax rates increases.

Role of the financier

A financier (/fɪnənˈsɪər/, /fəˈnænsɪə/, /faɪˈnænsɪə/)[5][6] is a person whose primary occupation is either facilitating or directly providing investments to up-and-coming or established companies and businesses, typically involving large sums of money and usually involving private equity and venture capital, mergers and acquisitions, leveraged buyouts, corporate finance, investment banking, or large-scale asset management. A financier makes money through this process when his or her investment is paid back with interest,[7] from part of the company's equity awarded to them as specified by the business deal, or a financier can generate income through commission, performance, and management fees. A financier can also promote the success of a financed business by allowing the business to take advantage of the financier's reputation.[8] The more experienced and capable the financier is, the more the financier will be able to contribute to the success of the financed entity, and the greater reward the financier will reap.[9] The term, financier, is French, and derives from finance or payment.

Financier is someone who handles money. Certain financier avenues require degrees and licenses including venture capitalists, hedge fund managers, trust fund managers, accountants, stockbrokers, financial advisors, or even public treasurers. Personal investing on the other hand, has no requirements and is open to all by means of the stock market or by word of mouth requests for money. A financier "will be a specialized financial intermediary in the sense that it has experience in liquidating the type of firm it is lending to".[7]


Economist Edmund Phelps has argued that the financier plays a role in directing capital to investments that governments and social organizations are constrained from playing:

[T]he pluralism of experience that the financiers bring to bear in their decisions gives a wide range of entrepreneurial ideas a chance of insightful evaluation. And, importantly, the financier and the entrepreneur do not need the approval of the state or of social partners. Nor are they accountable later on to such social bodies if the project goes badly, not even to the financier's investors. So projects can be undertaken that would be too opaque and uncertain for the state or social partners to endorse.[10]

The concept of the financier has been distinguished from that of a mere capitalist based on the asserted higher level of judgment required of the financier.[11] However, financiers have also been mocked for their perceived tendency to generate wealth at the expense of others, and without engaging in tangible labor. For example, humorist George Helgesen Fitch described the financier as "a man who can make two dollars grow for himself where one grew for some one else before".[12]

Guidelines of specific investors

Specific investment practices are suggested to maintain an ethical behavior based on principles universally accepted.[13].

Socially responsible investing

Socially responsible investing is recommended in all types of investment.

See also

  • Business magnate

  • Businessperson

  • Compound interest

  • Corporate finance

  • Crowd funding

  • Financial literacy

  • Growth capital

  • Investment

  • Investor profile

  • Model audit

  • Philanthropy

  • Real estate investor

  • Saving account

  • Securities market participants (United States)

  • Securities offering

  • Stock investor

  • Time value of money

  • Usury

  • Venture capitalist

Further reading

  • Matthew Josephson, The Money Lords; the great finance capitalists, 1925–1950, New York, Weybright and Talley, 1972.


Citation Linkopenlibrary.orgLin, Tom C.W. (2015). "Reasonable Investor(s)". Boston University Law Review. 95 (461): 466.
Sep 25, 2019, 1:32 AM
Citation Linkopenlibrary.orgBarron's
Sep 25, 2019, 1:32 AM
Citation Linkwww.sec.gov"Looking at Corporate Governance from the Investor's Perspective". Sec.gov. April 21, 2014. Retrieved 22 April 2014.
Sep 25, 2019, 1:32 AM
Citation Linkwww.investopedia.com"Investment Tax Basics for All Investors". Investopedia.com. Retrieved 30 December 2014.
Sep 25, 2019, 1:32 AM
Citation Linkwww.ahdictionary.comAmerican Heritage Dictionary
Sep 25, 2019, 1:32 AM
Citation Linkwww.ldoceonline.comLongman Dictionary of Contemporary English
Sep 25, 2019, 1:32 AM
Citation Linkopenlibrary.orgXavier Freixas, Jean-Charles Rochet, Microeconomics of Banking (2008), p. 227.
Sep 25, 2019, 1:32 AM
Citation Linkopenlibrary.orgHans Landström, Handbook of Research on Venture Capital (2007), p. 202.
Sep 25, 2019, 1:32 AM
Citation Linkopenlibrary.orgEdwin H. Neave, Modern Financial Systems: Theory and Applications (2009), p.8,
Sep 25, 2019, 1:32 AM
Citation Linkwww.europainstitut.atEdmund S. Phelps (October 10, 2006). "Dynamic Capitalism" (PDF). Europa-Institut.
Sep 25, 2019, 1:32 AM
Citation Linkopenlibrary.orgSterling Elliott, ed., Good Roads: Devoted to the Construction and Maintenance of Roads (1896), Vol. 24, p. 366.
Sep 25, 2019, 1:32 AM
Citation Linkopenlibrary.orgGeorge Fitch, Vest Pocket Essays (1916), p. 123.
Sep 25, 2019, 1:32 AM
Citation Linkwww.jubilee-centre.org"Investing as a Christian: Reaping where you have not sown by Paul Mills - Jubilee Centre". 17 June 1996.
Sep 25, 2019, 1:32 AM
Citation Linkwww.sec.gov"Looking at Corporate Governance from the Investor's Perspective"
Sep 25, 2019, 1:32 AM
Citation Linkwww.investopedia.com"Investment Tax Basics for All Investors"
Sep 25, 2019, 1:32 AM
Citation Linkwww.ahdictionary.comAmerican Heritage Dictionary
Sep 25, 2019, 1:32 AM
Citation Linkwww.ldoceonline.comLongman Dictionary of Contemporary English
Sep 25, 2019, 1:32 AM
Citation Linkwww.europainstitut.at"Dynamic Capitalism"
Sep 25, 2019, 1:32 AM
Citation Linkwww.jubilee-centre.org"Investing as a Christian: Reaping where you have not sown by Paul Mills - Jubilee Centre"
Sep 25, 2019, 1:32 AM
Citation Linken.wikipedia.orgThe original version of this page is from Wikipedia, you can edit the page right here on Everipedia.Text is available under the Creative Commons Attribution-ShareAlike License.Additional terms may apply.See everipedia.org/everipedia-termsfor further details.Images/media credited individually (click the icon for details).
Sep 25, 2019, 1:32 AM